Hawthorn Bancshares Inc. (NASDAQ: HWBK), today reported
consolidated financial results for the Company for the quarter
ended June 30, 2019.
Net income for the current quarter was $3.5
million, or $0.56 per diluted common share, compared to $4.7
million, or $0.74 per diluted common share, for the linked quarter
ended March 31, 2019, and net income of $2.9 million, or $0.46 per
diluted common share, for the quarter ended June 30, 2018.
Included in the linked quarter net income is a pretax gain on the
sale of our Branson branch of $2.1 million ($1.6 million after
tax), or $0.26 per diluted common share. Excluding this gain,
net income for the linked quarter was $3.0 million, or $0.48 per
diluted common share.
The year to date annualized return on average
common equity for the current year was 15.74% compared to 11.00%
for the prior year and the annualized return on average assets was
1.09% compared to 0.70% for the prior year.
Commenting on earnings
performance, Chairman David T. Turner said,
“Hawthorn continued to report increased earnings for the second
quarter 2019 with increases of $0.08 and $0.10 in non-GAAP earnings
per diluted common share compared to the prior linked quarter and
prior year quarter, respectively. Loan growth has slowed during the
current year, but net loans were still $62.1 million, or 5.7%,
higher than the prior year quarter-end and the net interest margin
has steadily improved over the last twelve months from 3.28% for
the six months ended June 30, 2018 to 3.39% for the six months
ended June 30, 2019. These factors have contributed significantly
to our improved earnings versus prior periods. In addition, we have
continued to maintain high loan quality as nonperforming loans to
total loans was 0.50% at June 30, 2019, compared to 0.49% at
December 31, 2018, and 0.58% at June 30, 2018, which has
contributed to lower loan loss provisions in the current year
versus the prior year.
Non-interest income of $2.1 million for the
current quarter was even with the prior linked quarter (excluding
the Branson branch sale gain) and only $0.3 million lower than the
prior year quarter. Non-interest expense of $9.7 million for
the current quarter was $0.2 million below both the prior linked
quarter and prior year quarter. The decrease from the prior periods
was mostly due to lower salaries and benefits expenses resulting
from our reduction of 43, or 13.3%, in full-time equivalent staff
since the quarter ended June 30, 2018.”
Net Interest
Income
Net interest income for the quarter ended June
30, 2019 was $12.2 million compared to $11.6 million for the
quarter ended March 31, 2019, and $11.0 million for the quarter
ended June 30, 2018. Loan growth slowed during the current quarter
but average loans were still $66.8 million, or 6.1%, higher than
the prior year quarter which contributed to the improved net
interest income. The year-to-date net interest margin of 3.39%
increased 13 basis points from the prior linked quarter and 11
basis points from the prior year quarter.
Non-Interest Income and
Expense
Non-interest income for the quarter ended June
30, 2019 was $2.1 million compared to $2.1 million for the prior
quarter ended March 31, 2019, and $2.4 million for the quarter
ended June 30, 2018. The net change from the prior year
quarter of $0.3 million was primarily due to decreases in real
estate loan servicing fees and gains on sales of mortgage loans of
$0.3 million.
Non-interest expense was $9.7 million for the
current quarter, a decrease of $0.2 million from the quarters ended
March 31, 2019 and June 30, 2018, respectively. These decreases
were mostly due to lower salaries and employee benefits expense
resulting from our reductions in staff.
Allowance for Loan
Losses
The Company’s level of non-performing loans was
0.50% of total loans at June 30, 2019 compared to 0.48% at March
31, 2019 and 0.58% at June 30, 2018. For the quarter ended
June 30, 2019, the Company recorded net charge-offs of $212,000, or
0.02% of average loans compared to net recoveries of $43,000 for
the quarter ended March 31, 2019, and net charge-offs of $185,000,
or 0.02% of average loans for the quarter ended June 30,
2018. The allowance for loan losses at June 30, 2019 was
$11.9 million, or 1.03% of outstanding loans, and 203.48% of
non-performing loans. At March 31, 2019, the allowance for loan
losses was $11.8 million, or 1.03% of outstanding loans, and
212.43% of non-performing loans. At June 30, 2018, the allowance
for loan losses was $11.2 million, or 1.03% of outstanding loans,
and 176.48% of nonperforming loans. The allowance for loan losses
represents management’s best estimate of probable losses inherent
in the loan portfolio and is commensurate with risks in the loan
portfolio as of June 30, 2019.
Financial
Condition
Comparing June 30, 2019 balances with March 31,
2019, total deposits decreased $64.5 million, or 5.2%, to $1.2
billion at June 30, 2019 while federal funds sold and other
overnight deposits correspondingly decreased $68.4 million. During
the same period, stockholders’ equity increased 4.3% to $109.4
million, or 7.4% of total assets. The total risk based capital
ratio of 13.74% and the leverage ratio of 10.03% at June 30, 2019,
respectively, far exceed minimum regulatory requirements of 8.00%
and 4.00%, respectively.
[Tables follow]
|
|
FINANCIAL
SUMMARY |
(unaudited) |
$000 |
|
|
|
Three Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
Statement of
income information: |
|
2019 |
|
2019 |
|
2018 |
Total interest income |
|
$ |
16,184 |
|
$ |
15,915 |
|
$ |
14,288 |
Total interest expense |
|
|
4,027 |
|
|
4,286 |
|
|
3,261 |
Net interest income |
|
|
12,157 |
|
|
11,629 |
|
|
11,027 |
Provision for loan losses |
|
|
250 |
|
|
150 |
|
|
450 |
Noninterest income |
|
|
2,121 |
|
|
2,091 |
|
|
2,390 |
Investment securities (loss) gain, net |
|
|
— |
|
|
1 |
|
|
108 |
Gain on sale of branch, net |
|
|
— |
|
|
2,074 |
|
|
— |
Noninterest expense |
|
|
9,671 |
|
|
9,888 |
|
|
9,943 |
Pre-tax income |
|
|
4,357 |
|
|
5,757 |
|
|
3,132 |
Income taxes |
|
|
837 |
|
|
1,091 |
|
|
225 |
Net income |
|
$ |
3,520 |
|
$ |
4,666 |
|
$ |
2,907 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic: |
|
$ |
0.56 |
|
$ |
0.74 |
|
$ |
0.46 |
Diluted: |
|
$ |
0.56 |
|
$ |
0.74 |
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended |
|
|
June 30, |
Statement of
income information: |
|
2019 |
|
2018 |
Total interest income |
|
$ |
32,099 |
|
$ |
27,832 |
Total interest expense |
|
|
8,313 |
|
|
6,050 |
Net interest income |
|
|
23,786 |
|
|
21,782 |
Provision for loan losses |
|
|
400 |
|
|
750 |
Noninterest income |
|
|
4,212 |
|
|
4,604 |
Investment securities gain, net |
|
|
1 |
|
|
206 |
Gain on sale of branch, net |
|
|
2,074 |
|
|
— |
Noninterest expense |
|
|
19,559 |
|
|
20,209 |
Pre-tax income |
|
|
10,114 |
|
|
5,633 |
Income taxes |
|
|
1,928 |
|
|
636 |
Net income |
|
$ |
8,186 |
|
$ |
4,997 |
Earnings per
share: |
|
|
|
|
|
|
Basic: |
|
$ |
1.30 |
|
$ |
0.80 |
Diluted: |
|
$ |
1.30 |
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
SUMMARY (continued) |
(unaudited) |
$000 |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
December 31, |
|
Key financial
ratios: |
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Return on average assets (YTD) |
|
1.09 |
% |
|
1.23 |
% |
|
0.70 |
% |
|
0.74 |
% |
Return on average common equity (YTD) |
|
15.74 |
% |
|
18.41 |
% |
|
11.00 |
% |
|
11.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Allowance for loan losses to total loans |
|
1.03 |
% |
|
1.03 |
% |
|
1.03 |
% |
|
1.02 |
% |
Non-performing loans to total loans (a) |
|
0.50 |
% |
|
0.48 |
% |
|
0.58 |
% |
|
0.49 |
% |
Non-performing assets to loans (a) |
|
1.64 |
% |
|
1.66 |
% |
|
1.79 |
% |
|
1.68 |
% |
Non-performing assets to assets (a) |
|
1.29 |
% |
|
1.24 |
% |
|
1.35 |
% |
|
1.30 |
% |
Performing TDRs to loans (a) |
|
0.25 |
% |
|
0.27 |
% |
|
0.36 |
% |
|
0.27 |
% |
Allowance for loan losses to non-performing loans (a) |
|
203.48 |
% |
|
212.43 |
% |
|
176.48 |
% |
|
208.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Non-performing loans include loans 90 days past due and accruing
and nonaccrual loans. |
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
December 31, |
|
Balance sheet
information: |
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
2018 |
|
Total assets |
|
$ |
1,470,914 |
|
|
$ |
1,538,311 |
|
|
$ |
1,448,650 |
|
|
$ |
1,481,682 |
|
Loans, net of allowance for loan losses |
|
|
1,145,060 |
|
|
|
1,142,807 |
|
|
|
1,082,983 |
|
|
|
1,134,975 |
|
Investment securities |
|
|
218,514 |
|
|
|
224,274 |
|
|
|
236,924 |
|
|
|
223,880 |
|
Deposits |
|
|
1,186,109 |
|
|
|
1,250,572 |
|
|
|
1,183,386 |
|
|
|
1,198,468 |
|
Total stockholders’ equity |
|
|
109,380 |
|
|
|
104,870 |
|
|
|
93,133 |
|
|
|
99,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share |
|
$ |
17.43 |
|
|
$ |
16.71 |
|
|
$ |
14.86 |
|
|
$ |
15.86 |
|
Market price per share |
|
$ |
26.80 |
|
|
$ |
22.35 |
|
|
$ |
21.06 |
|
|
$ |
20.22 |
|
Net interest spread (YTD) |
|
|
3.07 |
% |
|
|
2.95 |
% |
|
|
3.07 |
% |
|
|
3.05 |
% |
Net interest margin (YTD) |
|
|
3.39 |
% |
|
|
3.26 |
% |
|
|
3.28 |
% |
|
|
3.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Non-GAAP
Measures
Several financial measures in this press release
are non-GAAP, meaning they are not presented in accordance with
generally accepted accounting principles (GAAP) in the U.S. The
non-GAAP items presented in this press release are non-GAAP net
income, non-GAAP basic earnings per share, non-GAAP diluted
earnings per share, non-GAAP return on average assets and non-GAAP
return on average common equity. These measures include the
adjustment to exclude the impact of the gain on the sale of our
Branson branch that closed during the quarter ended March 31, 2019,
which is non-recurring and not considered indicative of underlying
earnings performance. The Company believes that the exclusion of
this item provides a useful basis for evaluating the Company's
underlying performance, but should not be considered in isolation
and is not in accordance with, or a substitute for, evaluating
performance utilizing GAAP financial information. The Company uses
non-GAAP measures to analyze its financial performance and to make
financial comparisons to prior periods presented on a similar
basis. The Company believes that providing such adjusted results
allows investors to better understand the Company's comparative
operating performance for the periods presented. Non-GAAP measures
are not formally defined by GAAP or codified in the federal banking
regulations, and other entities may use calculation methods that
differ from those used by the Company. The Company has reconciled
each of these measures to a comparable GAAP measure below:
|
NON-GAAP
FINANCIAL MEASURES |
(unaudited) |
$000 |
|
|
|
Three Months Ended |
|
|
June 30, |
|
March 31, |
|
June 30, |
Statement of
income information: |
|
2019 |
|
2019 |
|
2018 |
Net income – GAAP |
|
$ |
3,520 |
|
$ |
4,666 |
|
|
$ |
2,907 |
Effect of net gain on branch sale (a) |
|
|
— |
|
|
(1,638 |
) |
|
|
— |
Net income - Non-GAAP |
|
$ |
3,520 |
|
$ |
3,028 |
|
|
$ |
2,907 |
Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic – GAAP |
|
$ |
0.56 |
|
$ |
0.74 |
|
|
$ |
0.46 |
Effect of net gain on branch sale (a) |
|
|
— |
|
|
(0.26 |
) |
|
|
— |
Basic - Non-GAAP |
|
$ |
0.56 |
|
$ |
0.48 |
|
|
$ |
0.46 |
Diluted – GAAP |
|
$ |
0.56 |
|
$ |
0.74 |
|
|
$ |
0.46 |
Effect of net gain on branch sale (a) |
|
|
— |
|
|
(0.26 |
) |
|
|
— |
Diluted - Non-GAAP |
|
$ |
0.56 |
|
$ |
0.48 |
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended |
|
|
June 30, |
Statement of
income information: |
|
2019 |
|
2018 |
Net income - GAAP |
|
$ |
8,186 |
|
|
$ |
4,997 |
Effect of net gain on branch sale (a) |
|
|
(1,638 |
) |
|
|
— |
Net income - Non-GAAP |
|
$ |
6,548 |
|
|
$ |
4,997 |
Earnings per
share: |
|
|
|
|
|
|
Basic – GAAP |
|
$ |
1.30 |
|
|
$ |
0.80 |
Effect of net gain on branch sale (a) |
|
|
(0.26 |
) |
|
|
— |
Basic - Non-GAAP |
|
$ |
1.04 |
|
|
$ |
0.80 |
Diluted – GAAP |
|
$ |
1.30 |
|
|
$ |
0.80 |
Effect of net gain on branch sale (a) |
|
|
(0.26 |
) |
|
|
— |
Diluted - Non-GAAP |
|
$ |
1.04 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
June 30, |
|
March 31, |
|
June 30, |
|
December 31, |
Key financial ratios: |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
Return on average assets (YTD) – GAAP |
|
1.09 |
% |
|
1.23 |
% |
|
0.70 |
% |
|
0.74 |
% |
Effect of net gain on branch sale (a) |
|
(0.22 |
)% |
|
(0.43 |
)% |
|
— |
% |
|
— |
% |
Return on average assets (YTD) - Non-GAAP |
|
0.87 |
% |
|
0.80 |
% |
|
0.70 |
% |
|
0.74 |
% |
Return on average common equity (YTD) – GAAP |
|
15.74 |
% |
|
18.41 |
% |
|
11.00 |
% |
|
11.45 |
% |
Effect of net gain on branch sale (a) |
|
(3.15 |
)% |
|
(6.46 |
)% |
|
— |
% |
|
— |
% |
Return on average common equity (YTD) - Non-GAAP |
|
12.59 |
% |
|
11.95 |
% |
|
11.00 |
% |
|
11.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The pre-tax
gain on the sale of the Branson Branch was $2.1 million and $1.6
million after tax. |
|
|
|
|
|
About Hawthorn Bancshares
Hawthorn Bancshares, Inc., a financial-bank
holding company headquartered in Jefferson City, Missouri, is the
parent company of Hawthorn Bank of Jefferson City with locations in
the Missouri communities of Lee's Summit, Liberty, Springfield,
Independence, Columbia, Clinton, Osceola, Warsaw, Belton, Drexel,
Harrisonville, California and St. Robert.
Statements made in this press release that
suggest Hawthorn Bancshares' or management's intentions, hopes,
beliefs, expectations, or predictions of the future include
"forward-looking statements" within the meaning of Section 21E of
the Securities and Exchange Act of 1934, as amended. It is
important to note that actual results could differ materially from
those projected in such forward-looking statements. Additional
information concerning factors that could cause actual results to
differ materially from those projected in such forward-looking
statements is contained from time to time in the Company's
quarterly and annual reports filed with the Securities and Exchange
Commission.
Contact: Bruce Phelps
Chief Financial Officer
TEL: 573.761.6100 FAX: 573.761.6272
www.HawthornBancshares.com
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